Question
The Talbot Corporation makes wheels that it uses in the production of bicycles. Talbot's costs to produce 100,000 wheels annually are: Direct materials $30,000 Direct
The Talbot Corporation makes wheels that it uses in the production of bicycles. Talbot's costs to produce 100,000 wheels annually are:
Direct materials | $30,000 |
Direct labor | $50,000 |
Variable manufacturing overhead | $20,000 |
Fixed manufacturing overhead | $70,000 |
An outside supplier has offered to sell Talbot similar wheels for $1.25 per wheel. If the wheels are purchased from the outside supplier, $15,000 of annual fixed overhead could be avoided and the facilities now being used could be rented to another company for $45,000 per year. Direct labor is a variable cost.
At what purchase price for the wheels would Talbot be indifferent between making orbuying the wheels?
A. | $1.70 per wheel | |
B. | $1.60 per wheel | |
C. | $1.55 per wheel | |
D. | $1.15 per wheel |
when determining the discount rate used for the net present value method, an entrepreneur needs to consider:
A. | The risk of the investment | |
B. | The opportunity cost of investing in one project vs. another | |
C. | The rate of return on similar investments | |
D. | All of the above |
the cost of copier paper was:
A. | Relevant to the decision to purchase a new copier | |
B. | Not relevant to the decision to purchase a new copier | |
C. | Relevant to the decision to trade-in the old copier | |
D. | None of the above |
which of the following was NOT a reason for outsourcing?
A. | Outsourcing freed up capital to be used for other projects. | |
B. | Outsourcing eliminated high union wages. | |
C. | Outsourcing provided technical knowledge that the company lacked. | |
D. | Outsourcing increased capacity without require additional factory space. |
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